KUALA LUMPUR (Dec 3): Retailers are bracing for a profit margin squeeze, pressured by rising input and labour costs alongside the expanded 8% sales and service tax (SST). 

CIMB Securities highlighted that mall-based chains — including Bonia Corp Bhd (KL:BONIA), Padini Holdings Bhd (KL:PADINI), and AEON Co (M) Bhd (KL:AEON) —face a direct hit from the SST's expansion to cover leasing services.

It also named Yoong Onn Corp Bhd (KL:YOCB), Mynews Holdings Bhd (KL:MYNEWS), Berjaya Food Bhd (KL:BJFOOD), and MR DIY Group (M) Bhd (KL:MRDIY) as the other consumer stocks to be hit by higher costs.

"To mitigate these pressures, we expect operators to focus on cost efficiencies, tighter operational controls, and selective price pass-throughs, with a stronger MYR/RMB (ringgit-Chinese yuan) offering some relief for import-dependent retailers," said CIMB Securities in a note on Wednesday.

Nonetheless, the house expects consumer spending to be front-loaded in the first half of 2026, supported by festive-driven demand as most major celebrations fall in the first half of the year.

This will be further amplified by the second one-off RM100 Sumbangan Asas Rahmah (Sara) cash handout to all Malaysian adults in February 2026, said CIMB.

Based on its estimates, the Sara allocation will rise to approximately RM9.9 billion in 2026 (from RM5.1 billion in 2025), while the Sumbangan Tunai Rahmah or STR allocation is expected to decline to RM6.2 billion (from RM8.5 billion in 2025). 

CIMB highlighted 99 Speed Mart Retail Holdings Bhd (KL:99SMART) with more than 2,000 stores enrolled, MR DIY with about 20 stores, and Mynews with 30 Supervalue outlets as the key beneficiaries, given their participation and alignment with value-focused consumer demand.

The house noted that the consumer staples led the sector’s third-quarter performance this year with two companies beating expectations, while all three earnings misses came from retailers due to soft demand and higher operating costs.

CIMB upgraded Fraser & Neave Holdings Bhd (KL:F&N) to 'buy' from 'hold' on attractive valuations and maintained a 'neutral' call on the consumer sector. Its top sector picks are 99 Speed Mart, Farm Fresh Bhd (KL:FFB) and Padini.